All the Following Are True About Underwriting except

question 42

Multiple Choice

All the following are true about underwriting except:

• A) a major purpose of underwriting is to reduce adverse selection against the insurance company
• B) fair rates should be charged so that each group of insureds is not subsidized by other groups
• C) the underwriter should select only those insureds that are expected to have no losses
• D) the underwriter makes decisions based on criteria established by the company management

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Definitions:

Gross Wages

Gross wages are the total earnings of an employee before any deductions like taxes, retirement contributions, and health insurance premiums are made.

Form 4070

A form used by employees to report their tips to their employer.

FICA Withholding

The process of deducting Social Security and Medicare taxes from employees' paychecks, as mandated by the Federal Insurance Contributions Act.

Federal Income Tax

The annual income of individuals, corporations, trusts, and other legal entities is subject to a tax imposed by the IRS.